In a budget where the Chancellor reiterated his earlier promises that he would do ‘whatever it takes’ to support individuals, businesses and public services, he also acknowledged the need to fix the public finances and he wanted to be honest with the British people.
Following the Prime Minister’s roadmap to ease lockdown, the Budget was intended to provide its own roadmap of support to reflect the gradual reopening and recovery of the economy.
Although the OBR expects the economy to recover quickly once restrictions are lifted, the charity sector continues to face some enormous challenges. Many have had to dip into reserves to get through the last 12 months and are in a fragile state.
As a sector, where wage costs are often the largest cost, many will breathe a sigh of relief that the furlough scheme is being extended to September. Employers will be required to cover 10% of pay for unworked hours in July and 20% in August, in addition to the cost of employers NIC’s and pension. However, this has to be balanced with the increase in the National Living Wage by 2.2% to £8.91 from 1 April 2021 and is applicable to a wider workforce. It applies to workers aged 23 (down from age 25).
As many employees continue to work from home, it is also worth noting that the income tax exemption on employer-provided home office equipment has been extended for the 2021/22 tax year.
Charities and their subsidiaries will hopefully benefit from the restart grants of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality and other sectors that are opening at a later stage of lockdown easing.
In addition, there were some sector-specific funding packages including an additional £300 million to support theatres, museums and other cultural organisations in England through the Culture Recovery Fund. The Fund has provided a lifeline to the cultural sector over the last 12 months. This has been the toughest of times for this part of the sector as it now moves from resilience mode to restarting. We all look forward to being able to enjoy our museums, galleries and theatres again.
Other funding announcements include support for victims of domestic abuse, veterans in relation to mental health issues, armed forces charities and zoos.
Clarification is still required on EU state aid rules in relation to existing and new government grants and whether these rules no longer apply following our exit from the EU. If this is not confirmed, charities are at risk of missing out on vital funds.
Obviously, the extension of the reduced VAT rate for tourism and hospitality businesses to 30 September 2021 and the introduction of the 12.5% rate from 1 October 2021 to 31 March 2022 is good news for charities that operate in that sector. Unfortunately for many charities, particularly those in the health and welfare sector, the reduction will not ease the burden of irrecoverable VAT.
In his first budget since Brexit, has the Chancellor missed an opportunity to grasp the nettle and review the impact of VAT on the whole charity sector? Or am I being unfair – perhaps there will be an announcement on the so-called UK “tax day” on 23 March.
The extension to the 100% business rates reliefs for eligible retail, hospitality and leisure properties from 1 April 2021 to 30 June 2021 is welcomed. It will benefit charities operating in the relevant sectors, where they usually only receive 80% mandatory charity relief from their local authority. In addition, and more importantly, eligible trading subsidiaries will also benefit. This will include those that operate charity shops and catering/hospitality facilities that have been hardest hit by the pandemic. The 100% relief will be followed by a relief of two-thirds of business rates for the period 1 July 2021 to 31 March 2022.
It was announced this time last year that a fundamental review of business rates will be undertaken, and it is vital to the sector that charity relief is retained. We await further information on this review later in the year.
Social Investment Tax Relief, which was first introduced in 2014, provides income and capital gains tax incentives to encourage individuals to invest in social enterprises including charities. The relief was initially in place until April 2021 and the budget announces an extension to April 2023.
The freezing of personal tax thresholds will mean that although an individual’s net pay will remain the same as it is now, over time, individuals will pay more tax and some will pay tax at higher rates. This message should be communicated by fundraising teams to maximise income raised from Gift Aid.
Although charities will benefit to some extent from today’s announcements, for the majority I fear that this is a drop in the ocean and a missed opportunity for the Chancellor to provide more help to the sector at a time when it is #nevermoreneeded.
Our team are on-hand to help with any questions that you may have following this year’s budget, contact us today!
